Q1 2021 Service Corporation International Earnings Call
Good day, ladies and gentlemen, and welcome to the service Corporation International first quarter 2021 earnings come from school.
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I would now like to turn the conference over to the East yard management. Please go ahead.
Thank you. Good morning. This is Debbie young director of Investor Relations for STI welcome to our company's review of business results for the first quarter of 2021.
Jump into them for.
Remarks from commentary.
Let me.
Moving forward looking statements today.
The entire management team that stayed on.
Plans beliefs expectations or projections for the future are forward looking statements.
These forward looking statements are subject to risks and uncertainties that could cause actual results to differ.
For materially from that.
Contemplated in such statements.
These risks and uncertainties include but are not limit.
Those factors identified in our earnings release.
On our filings with the FTC that are available on our website.
During this call. We will also discuss certain non-GAAP financial measures a reconciliation of these non-GAAP measures to the upfront.
GAAP measures is provided on.
On our website.
Busters webcast.
It's also in our earnings press release, and 8-K that were issued yesterday.
With that out of the way I'll now pass it on to our channel.
Tom Ryan.
Thanks Debbie.
Hello, everyone and thank you for joining us on the call.
We hope you and your families are staying safe and healthy.
It's hard to believe it but it's been a little over a year just on.
Onset of the pandemic.
We're thankful that our associates and our communities are beginning to experience some relief from the overwhelming effects of COVID-19.
For up again I want to once again express my heartfelt, thanks and appreciation for my Sci family.
It is your courage and commitment that positions us for the results we posted this quarter.
You have continued to stay relentlessly focused on what we do best.
Helping our client families gain closure and healing.
<unk> of grieving Remembrance day celebration on.
I want to assure you that your health safety and wellbeing continues to be a top priority for us.
That was a quarter.
This morning, I'm going to begin my remarks, with a high level overview of the quarter.
Follow up on a more detailed analysis of our funeral and cemetery results and for.
Finally.
On our guidance and outlook for this year.
For the first quarter, we generated earnings adjusted earnings per share of $1 32, compared to 43 cents in the prior year for an extraordinary increase of more than 200%.
This strong earnings per share growth was driven by two factors.
Significant funeral volume increases, which we anticipated based upon December volume increases of 31%.
And a substantial increase in cemetery property sales, particularly preneed cemetery property sales, which exceeded our expectations and significantly enhanced our earnings per share results for the first quarter of 2021.
At a high level.
On the funeral and cemetery segments in the quarter and margin improvement of over 1000 basis for us.
Driven by double digit top line percentage growth, coupled with a more efficient cost structure.
We also benefited from a lower share count and lower interest expense, which was more than offset by a higher adjusted tax rate.
Let's take a look at the funeral results for the quarter.
Total comparable funeral revenues grew $109 million for almost 22% over the same period last year.
These favorable results were driven by our core funeral businesses as well as Sci direct.
Core funeral revenues grew $95 million due to a 22% increase in the number of core funeral services performed.
0.5% improvement in.
In the core funeral sales average.
In the first three months of the year, we continued to see a meaningful increase in the number of services performed due to COVID-19 with January and February showing very strong year over year growth.
Isn't that tapering off somewhat in March as comparisons to the prior year became more challenging.
And as the effects of the vaccine rollout began to impact this year.
For over a year now our frontline team has been serving record numbers of client families.
Continue to do so with compassion commitment professionalism and agility.
We were very pleased with the core funeral sales average growth of 5% in the quarter.
This was achieved despite a modest 20 basis point increase in the core cremation mix, which is well below our typical annual expectation for 100 to 150 basis points.
In March the funeral average rose an impressive 8% when compared to the prior year and more than offset the more difficult pre pandemic comps in January and February.
Additionally, when you look at the core average in absolute dollars in the month of March It is pretty much in line with pre COVID-19 levels.
I believe this is a testament to the value on.
Our families continue to place on Remembrance and celebration, which is very encouraging to us.
As restrictions are easing and both our client families and their guests comfort levels about larger gatherings improved due in part to the vaccine rollout, we should expect that improvement to continue.
Preneed funeral sales production for the first quarter grew an impressive $35 $3 billion for 16%, which exceeded our expectations.
Both our core funeral homes and Sci direct businesses posted strong increases after a challenging 2020.
The growth predominantly came in the month of March.
And we did have an easier comp in the back half of March but we also saw significant growth in leads from digital and direct mail.
Increase location traffic due to higher heavy services performed.
And from the gradual return of in person seminars.
From a profit perspective funeral gross profit increased $85 million and the gross profit percentage increased more than 1000 basis points to 31%.
Realizing a 78% incremental margin on our revenue growth.
We continue to benefit from growth in our high incremental margin core business, coupled with the efficiencies that have favorably impacted our cost structure.
Now shifting to cemetery.
Like I referenced earlier in our quarterly overview, we experienced significant growth in cemetery revenues in the back half of 2020.
Two supported carrying momentum into the first quarter of 2021.
But our cemetery performance this quarter, even exceeded our lofty expectations.
Comparable cemetery revenue decreased almost $161 million or 54% in the first for.
In terms of breakdown at need cemetery revenue accounted for $40 million for about 25% of the growth.
Driven by more on term it's performed.
In part to the effects of COVID-19.
Recognized preneed revenues accounted for about $120 million or the remaining 75 per cent of the revenue growth.
Due to higher than expected Preneed cemetery sales production during the quarter.
Preneed Cemetery sales production grew an astounding $130 million for 67% from the first quarter.
The majority of this growth for about $85 million was driven by an increase in core velocity for the <unk>.
Number of pre need contracts sold.
The remaining growth of about $45 million was about evenly split between increases in large sales activity.
As well as a higher quality core average sale.
Consumer reception and demand for our products and services remains very strong.
We saw significant lead growth this quarter, which is the combination of higher traffic from our Abbvie services and acceleration of wage for multiple lead channels, including digital and traditional lead sources as well as a record impact in certain markets from the changing holiday that drove elevated preneed.
Cemetery sales from our Asian communities.
We also continue to see on more productive and efficient sales force with better utilization of our customer relationship management system and improve conversion rates from our la campus.
Mhm Cemetery gross profit in the quarter grew by approximately $111 million and the gross profit percentage increased more than 1500 basis points to nearly 41% realizing a 69% incremental margin.
Now I'll speak to our revised outlook and provide a little color.
Back in February we'll call that we issued adjusted earnings per share guidance of $2 50.
For $2 90 per share.
We have qualified this guidance and provided a wider range than we ever have.
Historically as we felt it was difficult to predict the timing and net.
<unk> of the vaccine rollout.
Funeral volume comparisons the rest.
For the year, resulting in down mid single digit percentages for the entire 2021.
Favorable remaining nine months of funeral sales average.
Resulting in the return to 2019 pricing levels, showing low to mid single digit percentage growth over 2020 averages.
However, based upon our Preneed cemetery sales production for the first four months of the year.
We're increasing our guidance for the year from a decline in the mid single digits to finish the year on a range of flat to potentially low single digit percentage growth.
Primarily from this preneed cemetery sales production guidance increase we are adjusting our annual earnings per share guidance for $2 70 to $3, thereby raising our midpoint by 15.
As we noted in our guidance from last quarter, we still expect future periods earnings per share and cash flow results to be negatively impacted temporarily by.
The pull forward of funeral case volume and at need cemetery sales into 2020 and early 2021.
Still.
The efficiencies, we have gained by improving processes and leveraging technology.
Led us to produce a more competitive and profitable operating platform.
This combined with the capital structure improvements, we have made over the last 15 months.
Expected to allow us to produce earnings per share compounded annual growth returns in the low or even potentially mid teen percentage range for 2022 and 2023.
All of our pre COVID-19 2019 earnings per share base of $1 nine.
Even while absorbing these temporary pull forward effects.
From there we anticipate that we will begin to see the impact of baby boomers entering early seventies and realize the benefits of our investments in technology to stay relevant with the next generation of consumers.
These investments will enhance our ability to drive market share to improve both the physical and digital customer experience.
And in a more effective and efficient manner.
In closing I, just want to say what an honor it is to work with such a great team and I am proud to call My Sci family.
Selfless dedication through our families and communities so appreciated, especially in times like these.
My heartfelt thanks to Egypt.
With that operator, I'll now turn it over to Eric.
Thanks, Tom and good morning, everybody.
We are so proud of all 24000 of our colleagues that are managed through the challenges for the past year and a half I'm, particularly thankful for how our frontline field associates has been their compassionately, helping families and their greatest time of day and stepping up to support our communities through these very.
Challenging times looking forward I remain hopeful as it appears we finally might be emerging from the worst of this pandemic and soon to be able to return to a more normal future.
So is that most important thing said this morning, I would now like to shift to the business at hand, and begin to walk you through our cash flow results and capital deployment for the quarter and then briefly touch upon our revised full year cash flow guidance financial position update and capital deployment future plans.
We generated operating cash flow of nearly $300 million during the quarter, representing an impressive increase of $118 million or 65% over the prior year store.
So on Preneed Cemetery sales increased number of funeral services performed as well as increased at the cemetery and determined volume led to the robust growth in operating earnings which translated to strong operating cash flow results.
Cash flow was also affected by cash interest that increased $10 million predominantly as a result of timing of payments related to the recent debt refinancing transactions somewhat offset by lower rates on our floating rate debt.
Cash taxes also increased $12 million in correlation with the higher earnings.
Finally, we experienced a net use of working capital on the quarter, resulting from the tremendous growth in cemetery preneed property sales.
This drove our earnings. These sales are mostly paid for on an installment basis, which means the cash will be collected over time.
<unk> positively impact free cash for the remainder of this year.
We also experienced a timing difference of cash related to an additional payroll that was funded this quarter when compared to the first quarter of last year.
So now let us discuss our capital deployment of approximately $270 million during the quarter covering reinvestment into our businesses followed by growth capital Opportunistically, reducing debt balances and finally, returning capital to our shareholders. So I mean again, we invested $34 million.
On to our businesses through $24 million of maintenance capital and almost $10 million of cemetery development capital spend.
Our cemetery development capital was almost $15 million lower than the prior year quarter and it was lower than our expectations, primarily due to extended cold weather in certain areas of the country that delayed several of our cemetery development projects from a growth capital perspective, we invested about 9 million.
On growth capital towards the new build and expansion of several funeral homes. These newbuild should provide us with great low double digit percentage returns going forward and expand our footprint into desirable markets. We also deployed almost $6 million towards real estate purchases.
We only spent a small amount of acquisition capital during the quarter, which we believe is just timing as we continue to be confident in our targeted deployment range for acquisitions for the full year of $50 million to $100 million.
We also paid down our credit facility by a net amount of $80 million during the quarter as cash flow generation during the quarter as I've said was very robust.
Finally, we deployed over $140 million of capital to shareholders through dividends and share repurchases dividend payments from the first quarter total of about $36 million or 21 cents.
Per share.
So that is shifting to a few comments on our outlook and our financial position.
Earlier, Thomas as you heard highlighted the earnings strength of our business with a strong start to this year driving the need for us to adjust our guidance after the first quarter.
Cash flow outlook as separately changed so we have adjusted our cash flow guidance up from 600 to 700 million to revised guidance range of 650 to $725 nine.
This represents an increase of about $40 million at the midpoint of our guidance.
Higher cash earnings as well as some positive working capital expectations that I just mentioned.
Specs it to be somewhat offset by higher cash taxes and on that note.
We're now expecting on $180 million of cash taxes in 2021 on an additional $20 million over the $160 million, we guided to in February driven by the increase in earnings. We also continue to expect our full year normalized effective tax rate between 24 and 25%.
So therefore, our expectations and guidance do not contain any federal statutory tax rate changes at this time.
Our expectations for maintenance and cemetery development capital spending in 2021 remains unchanged at 235 to $255 nine.
Additionally, we continue planning for the deployment of $50 million to $100 million towards acquisitions and around $50 million and new funeral home construction projects.
Supporting these capital deployment expectations as our strong balance sheet, we continue to be very well positioned with a significant amount of liquidity of roughly $765 million at the end of the quarter consisted of approximately $245 million of cash on hand, plus just over $520 million.
<unk> on our long term bank credit facility on.
On the continued growth in EBITDA, our leverage at the end of the quarter fell below three times to 261 times. This leverage level was somewhat less than our expectations as EBITDA came in stronger than expected during the first quarter. This calculation now reflects a full four quarters.
A strong pandemic impacts to our EBITDA.
As we look beyond the impacts of this pandemic, we expect to settle into our targeted leverage leverage range of three five to four times.
So in closing we're off to a great start to 2021, our teams across the company continued to deliver great care to our client families and communities. We serve in this challenging environment. We began 2021 on very firm footing reported even stronger earnings and cash flow results that initially.
I am pleased that we were able to increase our 2021 guidance on looking forward I'm also impressed.
Perhaps on how much we have a learned and adapted during these trying times as an organization.
We have evolved to become a much stronger organization and while there are some expected headwinds in the near future as we look forward to 'twenty two 'twenty three I expect our improved foundation, we will continue to add even more value going forward than we initially expected.
Finally, we're most honored to be able to help our client families and our communities during their most difficult days and these very unusual times and deliver peace of mind to those who wish to develop plans for their future.
So with that operator that concludes our prepared remarks, I'd now like to turn it back over to you for questions.
Yes.
Thank you very much.
Ladies and gentlemen, we will now begin the question and on sensation.
To ask a question you May please star one on your take on.
You bet.
For all using a speakerphone please pick up your handset.
Keith.
So let's go for your question can you say store.
True.
Our first question is from a J rice.
Great.
Got it.
Thanks, Hi, everyone.
I appreciate the comments that Tom made about as updated thoughts on that the longer term outlook 'twenty, two and 'twenty three I'd be curious if there's any way that you could flush out maybe some of the underpinnings in your assumptions that gives you the confidence that the.
Those numbers are capable even as we look that far out.
Okay.
Alright. Thanks, a lot for that question is awfully difficult I think right now to try to decipher what a normalized earnings per share might be in 2023.
Considering all of those dramatic swings.
And earnings of late and it could be in the future from the impact of COVID-19.
So let me try to explain why I'm. So excited about the future outlook for our company.
For years, you've heard us talk about our long term earnings per share growth framework of 8% to 12%.
I think if you go back and use 2019 as a base in order to make some assumptions around growth.
This has the effect of removing the noise around COVID-19.
And for me it provides a lot of clarity about where we could be as a company in a few years, which I believe.
Essentially be above our 8% to 12% range.
On the funeral side, a J based upon our best projections.
The impact of the pull forward will likely have us performing about say the same number of funeral services.
2023, as we did in 2019 now those are assumptions credit to our best guess at this time.
So assuming reasonable growth from Sci direct and.
Minimal inflationary funeral prices, coupled with managing our expenses well, we would expect the contribution from the funeral segment to be relatively flat as the funeral volumes are flat to 19.
But remember the true earnings growth from funeral require increased funeral services, So think baby boomers.
However, keep in mind that a very significant learning from the COVID-19 experience was there when we get volume and the related revenue, 70%, 80% will drop to the bottom line.
This in and of itself is exciting but for this hypothetical I'm assuming it.
Baby Boomers haven't arrived yet in 2023, and then Mike.
So then shifting to cemetery like we said for a long time, our opportunity to drive meaningful near term earnings per share is tied to our success in generating Preneed cemetery sales.
So if you started out at 2019 base and assume we can grow Preneed cemetery.
Five 5% to six 5% compounded over a four year period like we have in the past.
The cemetery segment could likely add 75 to say, 85% per share to our 2019 earnings per share base of $1 90.
Then if you take the impact of our strategic capital deployment over this four year period.
Between the opportunistic share repurchases and acquisitions, we add another call it $35 45.
Through our 2019 base.
This would result in a 2023 earnings per share.
Approaching call it three to $3 on a quarter.
And again this would absorb the pull forward effect and reflects no impact from potential market share gains for baby Boomer volume expansion.
So thats my simpleton way to think about it and hopefully that is helpful. In clarifying why I'm. So excited about the future of this great growth.
Yeah, no that's very helpful. Thanks, a lot maybe one other follow up.
I know Eric ran through the capital deployment priorities and what you've done in the current quarter I guess in part of your long term.
Opportunities are these two areas so share repurchase I think the target for the year was 150 million you already did 106 in the first quarter of a million and then I think on the acquisition. There was a there's only a little bit of a tuck in and you've still got a goal of 50 to 100 for the year can you just update us.
As it targets changed are you still confident on those is there upside to the share repurchase aspect.
And maybe are you confident on the 50 to 100 on the acquisition for Us.
Yeah, let's let's take acquisitions first I mean, we are confident with that a J and I kind of alluded to that in my remarks, because there's not much there during the quarter as it relates to deployment on.
The cash flow statement as you correctly, just mentioned, but we really believe it's more of a timing issue.
We're excited about the pipeline there is definitely deals that are out there that we and our teams are looking at.
We're somewhat excited about it frankly, and so yes, we believe $50 million to $100 million is good for right now, which means that that activity should pick up from a capital planning perspective, as we go through the remainder of 2021.
Youre also correct on the share repurchases I think that was a great opportunity in produce and a nice frankly low double digit type return for.
For us at the levels that we saw earlier in in 'twenty, one we did spend just over $100 million.
What is the future look like.
Got you should.
<unk> CNS continue to put capital in that section in that area.
Absent any type of other relative return opportunity that is higher return I mean, frankly, we're going to deploy capital to the highest relative return opportunity.
M&A for example, it was much bigger or there's even larger newbuild deployment opportunities for example, hypothetically.
That type of return is probably going to exceed your share repurchase program. So from that perspective, you're following may we're going to deploy capital we're going to have good double digit type even low to mid teen type returns with a menu that we have but in terms of the exact mix. It's very hard for me to tell you.
But I agree with you definitely out of the gate.
We've strongly deployed towards share repurchase program in the first quarter.
Alright, Thanks, a lot.
Thank you. The next question is from Jay Bullock.
Please go ahead.
Hi, Thank you good morning, Thanks for taking the question on thanks, Tom for you.
Yes sharing your for your surround that.
The forward looking kind of outlook for breakfast.
Scenario there Hum.
Earnings, but to your point are you doing.
Jim on market share gains, but clearly the company debt.
This gain market share based on the on this growth rate that we've seen so could you kind of flashback to last a little bit I know, it's a very per site.
Any color or any numbers, even in terms of how you think about the market share.
Last year income into this year.
In both segments.
Sure Joanna I'll try to do that.
As you think about market share and really trying to tie back to C. D. C accurate data, it's really difficult to do it in real time, So we have to do it based upon.
Our ability to get information in certain markets and I have a couple of observations to make you feel better about that and again. My example was just saying I think we can achieve those goals even without market share and I'm with you I think we've gained a little bit, particularly in the markets, where we get scale, So where you saw big.
Cities that were impacted dramatically by COVID-19, we experienced for sure surges in market share and touching customers and helping them at very very challenging times. When you think about the new York's net la <unk> and the <unk>.
Places like that.
The other thing that's interesting we track as you know funeral volume by at need and in Preneed turning assets. So as you think about those two buckets. The thing we've been experiencing over the last couple of quarters and more acutely in the first quarter of this year I think our at need walk in on forgive me I'm speaking from memory.
It was up 24% and our preneed backlog change was 16. So there was a noticeable difference of more customers coming in debt.
Above and beyond what we're seeing our backlog that normally tells me that you're out there performing for customers that probably would not have come to you.
When you think about the radius that we draw from.
So I feel really good I think we definitely believe in certain markets. We've gained share I can't say that across the nation. We surely have created a lot more visibility.
I think based upon.
Our Google started using a lie.
Well I think you are.
We have an opinion that we have a very favorable impression in the communities where we operate.
Okay I appreciate the color.
And I guess on.
For topic.
On the on pricing I think on Mister car dose technical difficulty.
I think you were talking about the outlook for the year for the funeral average debt.
Do you expect that.
Return to 2019 pricing levels I think.
So can you talk about you know what.
Did you experience. This quickly March was strong because of the comps on you.
Said debt.
It sounds like from a pricing that absolute number was back to the pre pandemic level. So I guess, that's correct and can you talk about guidance.
Hum for I think its trading and markets down more.
Our open versus store fleet, where restrictions are pure vaccinations and whatnot and specifically.
I guess, the EBITDA from Canada, maybe if you can frame it ex Canada Ho Hum.
That's great all day.
Florida.
Sure. So first of all Youre correct.
The average we saw on March was effectively the same as January of 2020, so pre COVID-19.
U S Canada.
So we're very pleased that we've been able to get back to that number. So as you think about the comps in the back half of the year, we would expect the average year over year from here on out to grow in the.
Low to almost approaching mid single digit percentages.
On a comparable basis, but look a lot like 2019 net.
I think as we go forward, we feel very good about our ability to pass through inflationary pricing in and expand our menu of products and services as it relates to that on.
Specific market share right. There is a big difference and temporarily timing of weather market is open or not.
Again people are we surely are complying with local laws and regulations on suggestion. So if you can have a big gathering thats going to have an impact we've seen that I'd say more profoundly in the Canadian markets for a while we saw on in California, if it clearly California's open it up for Europe is opening up.
We have a lot of good momentum with these markets opening up I do think candidates.
Experienced being a little more difficulty and so we'll get there.
That we are so feel really good about the average and as we think about.
22, and 'twenty three if we learn something from this crisis is that people value. What we provide and you can see that cremation average only moved 20 basis points, which is again shocking when you think about your immediate reaction to what will people choose to do.
Through this COVID-19 crisis.
Again, they want to celebrate that will remember that when it gets through the grading process. So.
I think good news on the average.
Right now on the Oxy.
That was my other follow up on the other cremation rate.
It does shift for us.
Pretty much nonexistent this quarter, but I know, it's hard to say.
Whether this is.
We're here to stay but I guess do you have any views there in terms of what do you expect for the year.
In terms of the cremation percentage isn't I guess, what is the percent that channel in your on your revenue backlog that you create it has that changed.
The cremation percentage on the revenue backlog is pretty consistent.
We have seen is a little bit different is the very old consumer has basically come back.
Almost completely as it relates to their percentage of choosing service.
And the percentage in choosing service information more information hasn't moved that much we still see a little bit of a hold back as it relates to the percentage of people choosing service.
So we're seeing that on the preneed backlog too I think it kind of coincides with the aetna debt as I'm sitting there thinking about at this moment its hard to envision a big service because COVID-19 is happening. So we definitely saw that I would expect as markets open up that that begins to move back to traditional changes.
And again I think on the funeral.
<unk> side, I'm, sorry information mix side, clearly 20 basis points is probably smaller than what we anticipate so so we would expect that to gradually move back towards that 100 to 150 at some point.
I do think again youre using comparable numbers.
Probably the biggest cremation mix change happened in late March and early April with a lot of markets around the U S for shutdown. So so I think April should see a pretty favorable.
Maybe even a positive change for that cremation mix.
Thank you begin to normalize a little more as it gets on the back half of the year.
Yeah.
Great. Thank you for the color.
Thank you.
Okay.
Thank you very much ladies and gentlemen, just a reminder, excuse me store.
Thanks, Chris.
The next question is from John Ransom of Raymond James. Please go ahead.
Hey, Good morning can you hear me.
Yes, yes.
Great.
And here the lawnmowers.
[laughter] exactly.
Well thanks for all the good news.
Uh huh.
The question I have is as we move through this year and I know, it's short term.
How do we think about the correlation of you know.
Tough funeral comps to premier.
Pre need cemetery sales it seems like there was a relationship that was a good guy.
Is there a bad guy you're expecting and then secondly.
Going back to Joanna this question it looks like the correlation of your numbers with C. D. C was pretty good until this quarter and I know it's hard for you just stay on real time, but do you think that CDC numbers, showing you know high single digit declines in and deaths in the first quarter was just to offer did you really think you took that much share. Thanks.
You know from the from your second question. John This is Eric I'll answer it for you.
Not sure. It does those numbers have been updated completely would be my first comment.
On my second comment would be you have to also take into accounts that we had some saw some ability of a lag.
We're so busy you know when you take the West Coast. For example, you take Southern California, Arizona, Nevada.
As well.
We ultimately had to employ.
Ability for storage for <unk>, and such and our families. Our client families were to a large degree very patient because there was a backlog of us able to perform those funerals, especially in places like California, where you could even have a funeral service indoors. So that's what we've talked about before about deploying 10.
And such to do that but.
But remember.
You would not recognize that revenue until you perform the services and deliver the products. So from that perspective, you had deaths that occurred and CDC and back half of November and December which was very robust, which actually was revenue recognized in January and the first part of February for example.
So I think you have to take into account both of those factors, but I do agree with you. When we went and looked at the underlying data. It was hard for us to frankly recognize that underlying data John to be Frank about it.
Thanks, Jonathan and they call it for any questions.
Yes. Your first question was around cemetery Preneed cemetery growth.
First let me say that I think at need cemetery correlates very closely with.
With funeral volumes, because again, they're relying upon the same customer.
What we would see on the preneed side is a bit of a lag what we'd expect and the reason for that as well.
While some free to eight maybe companion sale some of them may take a month or two months at the lead that we are going to follow up on it. So we would expect even as the case volume comes down that you still have a number of good leads that you can work as you think about preneed cemetery.
When you really try to Peel this back and I think this is a helpful way to look at again I apologize I keep going back that I'm using 2019 as a base to think about what I expect in normal circumstances.
So if you take this quarter, we grew preneed cemetery sales of $130 million for 67%.
If you go back to 19.
Duction levels, let's say, let's grow at 7% a year for two years.
That would tell you that out of your $130 million growth about.
About $55 million of that is what you would have expected.
It's 75 million would be COVID-19 or COVID-19 related.
I mean back over to COVID-19 related as I think some of it may be directly related to a death on COVID-19.
And therefore, we can you know.
Generate sales that probably is going to have a two month lag on volume, but then there is a component of COVID-19 that I'll call as the awareness of the consumer and the awareness of the consumer is really strong and that's the piece I don't think we can tell right I don't know if because COVID-19 so fresh.
Our minds.
I would expect that to have a longer tail that people are going to be aware of.
Taken care of their affairs managing this part of it. So that's the piece that I think for a little more difficult.
But for me easily 55 of this 130 in my opinion, we would have gotten with or without COVID-19.
And it's the other piece that we got to kind of we're still figuring out but.
We feel confident about our ability to debt.
Excuse me.
Yes.
Great. Thanks, so much.
Thank you John.
Thank you very much so there's no further questions on queue.
Can I index of Benjamin for closing comments.
Okay. Thank you everyone for being on the call with US today stay safe and we look forward to talking to you again in about three.
Three months.
Sure.
Thank you very much.
Okay.
Thank you for attending today's presentation.
Yeah.
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